Navigating the National Minimum Wage: an employer’s guide to compliance

The Department for Business and Trade has recently issued its latest National Minimum Wage (NMW) “name and shame” list.  The spotlight has been shone on 524 employers, including some well-known businesses, who have fallen short of meeting the NMW requirements. These breaches have left over 172,000 workers in the UK out of pocket. Alongside the list, an “educational bulletin” has been published, aimed at guiding employers through the common pitfalls and complexities of the NMW regulations.

Understanding the Breaches

The bulletin provides a stark reminder that non-compliance, whether intentional or accidental, can lead to significant reputational damage and financial penalties. The main reasons for NMW breaches highlighted in the bulletin are as follows:

• Misunderstanding ‘Working Time’: Many employers failed to recognise what counts as ‘working time’. For instance, time spent on training, traveling between assignments, or even certain security checks can count as working time and must be paid accordingly.
• Deductions from Wages: Deductions for uniforms, equipment or related expenses can bring a worker’s pay below the NMW. Employers must ensure that any such costs do not reduce earnings below the legal minimum wage.
• Apprentice Wages: Mistakes often occur when paying apprentices and 16% of employers were found to have paid the incorrect apprenticeship rate. It is crucial to pay the correct rate which varies depending on age and whether the apprentice is in the first year of their apprenticeship.
• Salaried Workers: A common error is the failure to pay salaried workers the NMW when they work extra hours without additional pay, bringing their average hourly rate below the NMW.
• Record Keeping: Inadequate record keeping can lead to breaches. It is the responsibility of employers to keep accurate records proving compliance with NMW laws.

The NMW rates are updated annually, and employers must stay on top of these changes to ensure compliance. The educational bulletin reminds employers that there are specific rules about who is entitled to the NMW, and some employers mistakenly assume that interns and even some volunteers do not need to be paid the NMW. Employers must also understand how commission and bonuses factor into NMW calculations, as these can affect whether the NMW is being paid.

Risks of Non-Compliance

The “name and shame” list should prompt employers to scrutinise their pay practices, as nearly £16 million is to be repaid by employers who have failed to pay the NMW, together with financial penalties of up to 200% of the underpayment. The landscape of NMW regulations is ever-evolving and staying compliant requires a proactive approach. We encourage all employers to seek advice on your obligations and our Employment Team would be happy to advise you on the NMW requirements.

The new NMW rates will come into effect on 1 April 2024 and would be as follows: